Wednesday, 29 June 2016


A Labour Party Bill to establish 26 weeks paid parental leave (which UnitedFuture was pleased to back) has been supported by a majority of MPs at all stages, but the Minister of Finance has used a rare power of financial veto to prevent its becoming law.

The veto is a provision that has been available to governments since 1996 to override costly Opposition proposals that may have more than a “minor impact” on the government’s budget. It was put in place when MMP was introduced to prevent minor parties or temporary coalitions of parties being able to come together to effectively “blow the budget” through passing expensive measures (either in terms of new spending or revenue reductions) contrary to the policies of the government of the day.

In this instance, the Minister of Finance used the veto because he considered the alleged cost of Labour’s Bill – reportedly according to his estimate an extra $280,000,000 (or a mere 0.004%) of the government’s projected total expenditure this year – will have more than a “minor impact”. But the Minister was subsequently forced to admit to Parliament that his figure was wrong – the actual cost net of tax is a fraction of that, just $70,000,000, the merest 0.0009% of the $77,400,000,000 the government is expecting to spend this year.

So is a 0.0009% adjustment to the government’s operating budget more than a “minor impact”, or not? To most reasonable people the answer would surely be no. At the time the veto procedure was established, no dollar amount was set, being left for the government of the day to determine according to the circumstances of the time. But it was anticipated that the veto would be used sparingly and reasonably. While both National and Labour in government have applied the veto on a number of occasions, the application of it to an entire Bill, as happened now, is a first and raises its own set of questions.

At one level, no-one can be all that surprised. Since the Bill was introduced over a year ago National has said repeatedly it would veto it, if and when it came up for its final reading, because they considered it too expensive. As the figures, even the erroneous figure of $280,000,000, now show, that is an unlikely claim. It lacks all credibility completely when the correct figure of $70,000,000 is considered.

So why?

Possibly it was a simple case of political petulance. National did not want to be seen as giving Labour a win on this issue. Unlikely though, as National are not usually that small-minded, and in any case, if they thought Labour were on to a winner, they could have easily stolen their ground in this year’s Budget, the way they did last year when they lifted benefit rates for the first time in over 40 years.

Maybe it was because National are planning something similar in next year’s election Budget? Quite possible, but the problem is that the Budget will be just a few months before the election and there would be no time to put an extended scheme in place before then.

More likely, it was a calculated assessment by National’s leaders that, despite the perceived public sentiment in favour of the Bill, extending paid parental leave is just not that important an issue for their voter base, and that tax cuts (which could be in  place before the election – just) are more attractive. Time will tell on that, but as a supporter of the Bill (in fact, UnitedFuture thinks 26 weeks does not go far enough – we favour a phased in move to 52 weeks) I have to concede that the clamour of public support this time around was not that obvious, compared to that for a similar Labour Bill in the last Parliament. National sources already say that the veto issue has had no detrimental impact on their own internal polling. So, did National just do enough when it increased paid parental leave to 18 weeks a couple of years ago?

Whatever the reason, this issue has exposed some very important questions about the use of the veto and what constitutes a “minor impact”. The government’s use of the veto failed the reasonable test in this instance.

Its use needs to remain rare and reasonable to prevent untoward situations occurring, but in a multiparty environment the veto cannot be allowed to lapse into a government default option every time a passing majority of MPs combine on an important matter of policy which it opposes. National would be wise to put the veto back in the cupboard for a while.            

  

 

 

 

 

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